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Order Flow - Achieving the mindset

  • #1,241
  • Apr 6, 2011 3:33pm Apr 6, 2011 3:33pm
Carnagie, you seem to have a mindset in which you expect your trades to be absolutely perfect - nailing the bottom in this case. You realize that this is not gonna happen. OF is not a holy grail as you yourself said.

Also, maybe you traded too much? Why did you get so scared about 5 pips drawdown?

A 5 pip movement could be triggered by somebody sneezing in the market. At this level it's more or less randomness (actually HFT, but irrelevant for our discussion).

I used to do this a lot. In fact I was thinking of the anti-system - trade a sizable (but not dangerous) position, wait until I got so scared I wanted to bail out, and then double in, in the idea that everybody gets scared here and thus they reverse the flow. Of course, this doesn't work either for a variety of reasons.

Now I trade smaller, and regularly catch 100 pips movements. No sweat, no waking in the middle of the night to check positions. And the funny thing is that this is more profitable: sure, you win a lot less than if you were to play aggressively on each trade, but you actually win, because you don't get scared out so much and you can actually handle the bumps.
  • #1,242
  • Apr 6, 2011 3:52pm Apr 6, 2011 3:52pm
When it comes to trading, i put on enough size that when it goes against me, i feel the discomfort but it's not paralyzing.

I think you just have to learn to deal with that discomfort. Remember, trading is a competion between you and the rest of the traders out there. You just happend to bend over with that trade. Don't show your weakness by 'flinching'. Stay convicted and have a plan where to exit.
  • #1,243
  • Apr 6, 2011 4:09pm Apr 6, 2011 4:09pm
Quoting scott89
Carnegie, I suggest you to put on a trade, wait for it to be executed and then leave the PC, or just close the platform.
Reopen it later on. It helped me a lot, because I got used to not touch the trade, so when later on I kept open the platform, I didn't have problems.

Entry, stoploss, takeprofit and a rule about the price almost reaching the entry point and then reversing is all you need to manage simple short term trades.

That's my thinking though. =)
Good luck my friend.
Hey scott where have you been?
I have thought about this also but it really feels like I am not developing a mentality that will help me. I try to find stuff (specially in trading) that suits my personality and making a choice and walk away to let it do whatever it wants has never been in my interest. But maybe you are right you know, maybe that is needed in the beginning of the stage, just to train myself.. It kinda feels fucked to put on a trade and walk away, just let it do what it wants to, but I might be wrong.. I'll think about and thanks man!

Quoting seagreen
Try the following thing. Before making any decision, like entering a trade with a market or limit order, moving SL or TP, exiting a trade prematurely etc, think if such decision will make you profitable in the long run. The outcome of any particular trade does not matter, what matters is where you are after 100 trades. I know, you're trying to get to 80%+ winrate, but it's not easy, you'll need a lot of practice before you get there. So for now focus on repeating something that you have an idea about. Do it strictly according to your...
The thing is, I always "trig" myself in the beginning of a trade after I chose to take it. Like "this one is going to be good", "remember, you are a trader, dont fuck up".. but then it reaches a point where I can say well fuck it I'm wrong and then it reverses.. so whilst I agree with what you are saying, I have tried it (more or less) and it doesnt work for me.. Maybe I'm to deep into the "cant lose a trade because this is order flow" mentality??

Quoting EmeraldEyes
Think about how to place stops where they can't be hit.

Personally I don't trade with TPs (anymore).. something about breakeven or big trade that suits my style.
Can you place a stop outside of the chart?
I really have thought about where to place the stops, or as grk says "a place where the market has to go thru several mispricings".. but then the problem lies in.. what is a mispricing?


Quoting grkfx

Now the ideal trader mindset would be something like this I believe:

You find the entry criteria and place the trade. You set your stop loss. You have rules in your system that state when to move the stop to breakeven, or move the stop to lock in profits, etc. Only when those conditions are met do you exit your trade, or move your stop. Now you may say, well I want to flexible and thus don't need rules! Well thats kind of the problem. You need some sort of framework/rules that you tend to follow.
Then I need to start thinking about MM aswell.. I feel now, in hindsight, that I disregarded it totally because I thought "well, order flow is going to take care of everything because my entry will be right at the pip and then skyrocket"..

Yes the problem with being in a trade and looking for what is causing the drawdown is that you start to think about shit that doesnt even have anything with it to do you know? So what in reality is noise.. seems like major news in my eyes while in a trade.

Quoting Adal
Also, maybe you traded too much? Why did you get so scared about 5 pips drawdown?
A 5 pip movement could be triggered by somebody sneezing in the market. At this level it's more or less randomness (actually HFT, but irrelevant for our discussion).
No Adal, that is a damn good question as I used to overtrader but now I just waited the whole damn day for the perfect setup and there it was. As I commented on grkfx's post I don't know what the hell happens to me while in a trade.
Correct, a 5 pip movement is someone scratching their balls but I saw it as a continuation of the move to go and hit my stop. As I said to grk, if I didnt have the trade on - I would have understood the reason for the movement, but because I was in a trade I was totally paralyzed and thought of a million reasons why this trade should hit my stop.

It is becoming more and more obvious that I need to work on my psychology - especially the holy grail mindset (funnily enough, I already know there isnt any because I went thru that period 18 years ago.. but then why am I doing this?). I also need to put down some time on MM and how to enter/exit positions. Anyone care to share some ideas?

Take care and thank you all!

PS. What is so bad with averaging in or averaging down? Why is everyone so negative about it?
  • #1,244
  • Apr 6, 2011 4:21pm Apr 6, 2011 4:21pm
Sounds like it's time to go back and read those 'lame' psychology threads with new understanding.

In reality, it will just take time to learn what your psychology is by observing yourself while you trade and then finding a way to 'deal with it' or even better turn it into a strength. Psychology is something you will never have 100% in control, you will still mess up time to time. Even the pro's with 20+ years (market wizards) still have moments of weakness.

Trading is a cocktail. You have to have all the ingredients to make it work. An edge by itself is not enough, MM by itself is not enough, psychology by itself is not enough. You have to have them all.

Many Pips.
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #1,245
  • Apr 6, 2011 4:24pm Apr 6, 2011 4:24pm
Quoting Carnegie
PS. What is so bad with averaging in or averaging down? Why is everyone so negative about it?
There is a difference between averaging a position and scaling in a position. Several great threads on this subject on FF as well as MM threads.
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #1,246
  • Apr 6, 2011 4:50pm Apr 6, 2011 4:50pm
Quoting LasVahGoose
There is a difference between averaging a position and scaling in a position. Several great threads on this subject on FF as well as MM threads.
Losers average losers.

Then have a read of this thread:

http://www.forexfactory.com/showthread.php?t=62066

Twoblink is very knowledgeable and I would also recommend reading his posts if you have time.

Hope this helps,

James.
  • #1,247
  • Apr 6, 2011 6:07pm Apr 6, 2011 6:07pm
Quoting Carnegie
Correct, a 5 pip movement is someone scratching their balls but I saw it as a continuation of the move to go and hit my stop. As I said to grk, if I didnt have the trade on - I would have understood the reason for the movement, but because I was in a trade I was totally paralyzed and thought of a million reasons why this trade should hit my stop.
Do you really believe that you would have understood the reason of the 5 pip movement if you weren't trading? You are saying that basically you have an explication for every 5 pip movement. Of course, there is an explanation: "somebody sold a lot"

Quote
PS. What is so bad with averaging in or averaging down? Why is everyone so negative about it?
Hanover explained it best. The basic idea is this: averaging down is good if the probability of success increased. It's bad if you are just trying to recoup the loses.

Example: you are an overbought/oversold trader (value trader). You see RSI < 20 and you buy a lot. The price goes down, and RSI is now < 5. You buy another lot, because your chances increased (the pair is even more oversold now).

Like this:
http://www.financial-spread-betting....aler_chart.jpg

But what about if you are an OF trader, and inferred that there is a bunch of stops somewhere under the current price. You wait until they are taken out, then you buy, thinking that now with the stops taken the market can resume it's ascending path. But instead of rising, the market continues falling. Here it would be a mistake to average in - your chances don't increase in this system - there are no more stops lower, you have no reason anymore to expect a rise.

Quote
I was totally paralyzed and thought of a million reasons why this trade should hit my stop.
This happened a lot to me when I traded by gut instinct. I'm not made for that. I realized that I needed statistical assurance that what I'm doing is going to work. Then I stopped second-guessing my decisions.

However, I keep a flexible mind. If something truly unique happens (like the Japanese earth-quake), I carefully consider every move. I was 110% sure that after the huge down move in USD/JPY it was going to bounce back hard. My system said that (but considering the situation the statistics were not valid anymore at this point), my OF mentality said that, in fact I was expecting a historical new low in USD/JPY even before the earthquake. If there were no earthquake, I would have bought the historical low. But I didn't dare now, it would have been gambling for me, considering the Fukushima problem. The unbelievable wide spread that I had on my broker didn't encourage me either - what if I got stuck and couldn't get out? I did the right thing and watched from the side. The HFT people do the same - when the market goes crazy, they pull out, even if they could likely make a killing.
  • #1,248
  • Apr 6, 2011 6:08pm Apr 6, 2011 6:08pm
I think it's safe to say everyone goes through what you are Carnegie. Trading broke me about 19 months ago, and I'm thankful for it everyday now.

Trading is going to show you things about yourself that nothing else will, and you won't be able to hide from it because the p/l will be an in your face reminder. Embrace it, and determine that no matter what, your going to keep at it and come out a better person on the other end.

Look at what might be causing you to get scared out of trades (impatience, fear of failure, lack of confidence, ect ect) and then make it a point to work on those things.

My biggest problem was that I had terrible self esteem that I hid from through my other accomplishments in life. It took me a lot of painful months and lost money to finally face up to it, but I am a much more confident and relaxed person now. When I take a trade, the outcome matters not to who I am as a person now, so it's much easier to hang in on some drawdown, and stay in when I'm winning. That's my story.

I share because I think what your going through is an important step. Don't run from it, don't try and fix it by creating a bunch of trading rules and introducing rigidity, face it work it out!
  • #1,249
  • Apr 6, 2011 6:41pm Apr 6, 2011 6:41pm
I think psychology in trading comes down to your faith. After you've done all your research and know what THE TRADE is, you then must step up to the plate, commit your capital to it and have faith it will work out. Have an acceptable DD in mind, or set a stop loss and walk away.

I agree with Adal, 5 pips is quite the little sneeze. In my current Dollar Lira trade, I pay a 20-60 pip spread when I put on new positions that take a few days to move into profit, I find the best solution is to look at the market very briefly twice daily. If a position is not in profit, my motto is "give it a few weeks." The only way I'll do a panic exit is if I know something fishy is going on, but DD is part of gig, especially with new positions.

The more you can forget about your trades, the more they will grow, and the better off you'll be.
  • #1,250
  • Apr 6, 2011 6:53pm Apr 6, 2011 6:53pm
Quoting Scotty B
I find the best solution is to look at the market very briefly twice daily. If a position is not in profit, my motto is "give it a few weeks." The only way I'll do a panic exit is if I know something fishy is going on, but DD is part of gig, especially with new positions.

The more you can forget about your trades, the more they will grow, and the better off you'll be.
You discovered empirically exactly what Taleb recommends in "Fooled by Randomness". Many traders could benefit from this. I highlighted the relevant part:

http://dl.dropbox.com/u/190212/ff/fo...s_sampling.png
  • #1,251
  • Apr 6, 2011 7:01pm Apr 6, 2011 7:01pm
Quoting Scotty B
I think psychology in trading comes down to your faith. After you've done all your research and know what THE TRADE is, you then must step up to the plate, commit your capital to it and have faith it will work out. Have an acceptable DD in mind, or set a stop loss and walk away.

I agree with Adal, 5 pips is quite the little sneeze. In my current Dollar Lira trade, I pay a 20-60 pip spread when I put on new positions that take a few days to move into profit, I find the best solution is to look at the market very briefly twice daily. If a position...
Reminiscenes anyone? "sitting" I wholeheartedly agree with you Scotty. Especially for us guys who have other things to do, school, work, etc. That or sleeping a couple hours a day and watching the European session . No thanks. Taking into account the spread per your example another positive of the "patient" approach or longer term trading if someone feels obliged to calling it that is.. that the need for our "edge" to overcome the inherent obstacle imposed by the spread is drastically reduced.
  • #1,252
  • Apr 6, 2011 7:12pm Apr 6, 2011 7:12pm
I'm pretty sure I've already said this, but it also helps to approach the market cautiously-- as a jerk. When you find your trade, try never explaining the trade with any technical lingo whatsoever aside from maybe a price or price range. Explain what real forces in the world are supporting your trade and keep it real simple. Think as an investor, only funnel your hard earned money where it makes sense to those who deserve to use it. Also, filter out most news, don't sweat lots of the silly technical reports. Even Rueters and Bloomberg need to put something out there to "explain" why price moved today. They do this everyday... Just keep your trade in mind and only focus on the things that might mess that up.
  • #1,253
  • Apr 6, 2011 7:35pm Apr 6, 2011 7:35pm
Quoting Jimmy Jones
Trading is going to show you things about yourself that nothing else will, and you won't be able to hide from it because the p/l will be an in your face reminder.

...
My biggest problem was that I had terrible self esteem that I hid from through my other accomplishments in life. It took me a lot of painful months and lost money to finally face up to it, but I am a much more confident and relaxed person now.
Amen brother... Amen.
  • #1,254
  • Apr 6, 2011 9:31pm Apr 6, 2011 9:31pm
I don't want to sidetrack this into a psychology thread (which I generally don't read anyway) but since it sounds from this post like you were second-guessing yourself all over the place, you might try this three-step approach.

Step 1. Place your trade along with whatever trade/risk management tools you use (stops, TP, hedging option position, etc.)

Step 2. Turn off your computer and go take a walk. Then do other things. Then do some more other things.

Step 3. Come back later and see how the trade went.

Wash, rinse, repeat.



Quoting Carnegie
Allright you know the deal. Live and all.

The only thing I have to say is that my psychology is fucked. I know there are a million threads about psychology but people dont trade like we do so I need some OF thoughts..

Today I placed an awesome trade seriously, 0,5 pips from bottom. Then it moved up 5-7 pips and then moved down quite fast so it closed it immediately. The fucked up shit is that it turned around in a jiffy and continued and never looked back.

Why did I do this? Why did I feel this? How can I tackle this problem?
Need some...
  • #1,255
  • Apr 6, 2011 9:39pm Apr 6, 2011 9:39pm
Quoting redbaron1981
Losers average losers.
Sounds like a bumper sticker.
  • #1,256
  • Apr 6, 2011 9:44pm Apr 6, 2011 9:44pm
The whole place a trade, close your computer, and come back at a later point is a bit overrated at times. That strategy can work fine for swing trades, but not necessarily for day trades.

The closing of the computer and coming back at a later point, very subtly implies that you are not in control of your own emotions and psychology, and thus need to resort to drastic measures (closing of computer/trading platform) in order to manage them. Now that is fine in the beginning as you don't want to lose money. But you should be striving for the ideal of always being in control of your emotions and trading psychology and mindset no matter if you are watching the markets or not.

Also, if you are a order flow day trader, you HAVE to be watching the markets closely. You can never close your platform when you are orderflow daytrading Why? Because if you close your platform/computer then the fundamental value/sentiment could of shifted in the middle of the day and if you haven't noticed it, then your stop can get smoked, or your paper profit on your open position evaporated so fast you don't know what hit you. Not to mention the fact of constant event risk at various points throughout the day that you need to manage through and adjust through.
Private message me for a link to my order flow website.
  • #1,257
  • Apr 6, 2011 10:28pm Apr 6, 2011 10:28pm
Quoting grkfx
The whole place a trade, close your computer, and come back at a later point is a bit overrated at times. That strategy can work fine for swing trades, but not necessarily for day trades.

The closing of the computer and coming back at a later point, very subtly implies that you are not in control of your own emotions and psychology, and thus need to resort to drastic measures (closing of computer/trading platform) in order to manage them. Now that is fine in the beginning as you don't want to lose money. But you should be striving for the ideal...
So what did you do before you traded fulltime? I just wondered when you found the time to watch the market. That's one thing I found to be extremely hard to do when having normal committments which is maybe why I pushed myself into a more longer term approach. Classes/Labs 8-6PM doesn't leave alot of time.

Just wondered how you got started did you just trade the Euro session primarily and get a little bit of sleep on your offtime? Doesn't seem like alot happens in the Asian session.
  • #1,258
  • Apr 6, 2011 10:36pm Apr 6, 2011 10:36pm
Quoting redbaron1981
Losers average losers.

Then have a read of this thread:

http://www.forexfactory.com/showthread.php?t=62066

Twoblink is very knowledgeable and I would also recommend reading his posts if you have time.

Hope this helps,

James.
Not a fan at all. What makes you say he is very knowledgeable? What has he said that has improved your trading? Maybe I'm missing something.
  • #1,259
  • Apr 6, 2011 11:08pm Apr 6, 2011 11:08pm
Quoting Deusomega
So what did you do before you traded fulltime? I just wondered when you found the time to watch the market. That's one thing I found to be extremely hard to do when having normal committments which is maybe why I pushed myself into a more longer term approach. Classes/Labs 8-6PM doesn't leave alot of time.

Just wondered how you got started did you just trade the Euro session primarily and get a little bit of sleep on your offtime? Doesn't seem like alot happens in the Asian session.
Well I never said I trade full time now. If you have normal time commitments, you still try to find a way. If you want it badly enough you find a way. If you want to day trade you find a way to figure out which days are going to be volatile. You wake up and try to trade European session. If that means you get a few hours less sleep then so be it. If you need to take naps you do it. Ultimately it may mean you exit the trade prematurely as you may have other time commitments, but if you have a true order flow edge, then you can still make a lot of money even cutting trades prematurely. I am just saying, if you are going to daytrade, you might as well do it right. Day trade involves more time commitments and more stress, so you might as well do it right and generate oversized returns. If you are not generating oversized returns from your daytrading activities, then why would you do it?

The other option for people with time commitments is of course swing trading.

Just my thoughts.
Private message me for a link to my order flow website.
  • #1,260
  • Apr 6, 2011 11:37pm Apr 6, 2011 11:37pm
Quoting grkfx
Well I never said I trade full time now. If you have normal time commitments, you still try to find a way. If you want it badly enough you find a way. If you want to day trade you find a way to figure out which days are going to be volatile. You wake up and try to trade European session. If that means you get a few hours less sleep then so be it. If you need to take naps you do it. Ultimately it may mean you exit the trade prematurely as you may have other time commitments, but if you have a true order flow edge, then you can still make a lot of...
True all valid points!
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